EPR Properties

07/30/2026 | Press release | Distributed by Public on 07/30/2026 07:19

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q of EPR Properties (the "Company", "EPR", "we" or "us"). The forward-looking statements included in this discussion and elsewhere in this Quarterly Report on Form 10-Q involve risks and uncertainties, including anticipated financial performance, anticipated liquidity and capital resources, business prospects, industry trends, shareholder returns, performance of leases by tenants, performance on loans to customers and other matters, which reflect management's best judgment based on factors currently known. See "Cautionary Statement Concerning Forward-Looking Statements," which is incorporated herein by reference. Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in Item 1A - "Risk Factors" in our 2025 Annual Report.
Overview
Business
Our primary long-term business objective is to enhance shareholder value by achieving predictable and increasing Funds From Operations As Adjusted ("FFOAA"), Adjusted Funds From Operations ("AFFO") and dividends per share. FFOAA and AFFO are non-GAAP financial measures and are defined and reconciled below in the section titled "Non-GAAP Financial Measures." Our growth strategy focuses on acquiring or developing experiential properties in which we maintain a depth of knowledge and relationships, and which we believe offer sustained performance through most economic cycles.
Our investment portfolio includes ownership of and long-term mortgages on Experiential and Education properties. Substantially all of our owned single-tenant properties are leased pursuant to long-term, triple-net leases under which the tenants typically pay all operating expenses of the property. Tenants at our owned multi-tenant properties are typically required to pay common area maintenance charges to reimburse us for their pro-rata portion of these costs.
We believe our management's knowledge and industry relationships have facilitated opportunities for us to acquire, finance and lease properties. Our strategy has been to structure leases and financings to ensure a positive spread between our cost of capital and the rentals or interest paid by our tenants. To mitigate initial lease-up risks and support a predictable income stream, we typically acquire or develop single-tenant properties that are pre-leased under long-term leases. We have also entered into certain joint ventures. We intend to continue entering into some or all of these types of arrangements in the foreseeable future.
Historically, our primary challenges have been locating suitable properties, negotiating favorable lease or financing terms (on new or existing properties), managing our expanding portfolio and having a cost of capital that allows us to grow our investments in new properties beyond those funded primarily with free cash and disposition proceeds.
As of June 30, 2026, our total assets were approximately $6.1 billion (after accumulated depreciation of approximately $1.8 billion) with properties located in 43 states and Canada. Our total investments (a non-GAAP financial measure) were approximately $7.5 billion as of June 30, 2026. See "Non-GAAP Financial Measures" for the reconciliation of "Total assets" in the consolidated balance sheet to total investments at June 30, 2026 and December 31, 2025. We group our investments into two reportable segments, Experiential and Education. As of June 30, 2026, our Experiential investments comprised $7.1 billion, or 95%, and our Education investments comprised $0.4 billion, or 5%, of our total investments.
As of June 30, 2026, our Experiential portfolio (excluding property under development, undeveloped land inventory and two joint venture properties) consisted of the following property types (owned or financed):
•148 theatre properties;
•61 eat & play properties (including seven theatres located in entertainment districts);
•35 attraction properties;
•11 ski properties;
•four experiential lodging properties;
•30 fitness & wellness properties;
•one gaming property; and
•one cultural property.
As of June 30, 2026, our wholly-owned Experiential real estate portfolio consisted of approximately 19.5 million square feet, was 99% leased or operated and included $10.0 million in property under development and $20.2 million in undeveloped land inventory.
As of June 30, 2026, our Education portfolio consisted of the following property types (owned or financed):
•46 early childhood education center properties; and
•nine private school properties.
As of June 30, 2026, our wholly-owned Education real estate portfolio consisted of approximately 1.1 million square feet and was 100% leased.
The combined wholly-owned portfolio consisted of 20.6 million square feet and was 99% leased or operated.
Geopolitical and International Trade Environment
Recent geopolitical events and macroeconomic trends, including evolving global armed conflicts and significant changes in U.S. and international trade policies, have produced heightened uncertainty. This uncertainty could weaken economic conditions, contribute to inflation, increase borrowing costs and decrease consumer spending. Global trade uncertainty and supply chain disruptions may impact our business by increasing the cost of construction materials, which in turn may lead to higher development and renovation expenses. This increase in costs may result in reduced yields on development projects and potentially delay or result in cancelled planned projects. Additionally, our tenants and their customers are similarly experiencing these uncertainties, which could negatively affect their financial resources and ability to satisfy their obligations to us.
Operating Results
Our total revenue, net income available to common shareholders per diluted share and FFOAA per diluted share are detailed below for the three and six months ended June 30, 2026 and 2025 (in millions, except per share information):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 % Change 2026 2025 % Change
Total revenue $ 196.1 $ 178.1 10.1 % $ 377.3 $ 353.1 6.9 %
Net income available to common shareholders per diluted share $ 0.79 $ 0.91 (13.2) % $ 1.53 $ 1.69 (9.5) %
FFOAA per diluted share $ 1.42 $ 1.26 12.7 % $ 2.67 $ 2.45 9.0 %
The major factors impacting our results for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025 were as follows:
•The effect of investments and dispositions that occurred in 2026 and 2025 as well as contractual increases in rent and interest related to existing investments;
•The recognition of lower other income and other expense primarily related to having fewer operating properties for the three and six months ended June 30, 2026 versus the three and six months ended June 30, 2025;
•The recognition of higher retirement and severance expense for the six months ended June 30, 2026 versus the six months ended June 30, 2025;
•The increase in the benefit for credit losses, net for the six months ended June 30, 2026 versus the six months ended June 30, 2025;
•The recognition of lower gain on real estate transactions for the three and six months ended June 30, 2026 versus the three and six months ended June 30, 2025; and
•The increase in interest expense for the three and six months ended June 30, 2026 versus the three and six months ended June 30, 2025.
For further detail on items impacting our operating results, see section below titled "Results of Operations." FFOAA is a non-GAAP financial measure. For the definitions and further details on the calculations of FFOAA and certain other non-GAAP financial measures, see the section below titled "Non-GAAP Financial Measures."
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and related notes. In preparing these financial statements, management has made its best estimates and assumptions that affect the reported assets and liabilities and the reported amounts of revenues and expenses during the reporting period. The most significant assumptions and estimates relate to the valuation of real estate, accounting for real estate acquisitions, assessing the collectability of receivables and the credit loss related to mortgage and other notes receivable. Application of these assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates. A summary of critical accounting policies and estimates is included in our 2025 Annual Report. For the six months ended June 30, 2026, there were no changes to critical accounting policies.
Recent Developments
Investment Spending
Our investment spending during the six months ended June 30, 2026 and 2025 totaled $492.2 million and $86.3 million, respectively, and is detailed below (in thousands):
Six Months Ended June 30, 2026
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition Mortgage Notes or Notes Receivable Investment in Joint Ventures
Experiential:
Theatres $ 33 $ - $ 33 $ - $ - $ -
Eat & Play 18,875 17,907 968 - - -
Attractions 387,599 - - 387,599 - -
Experiential Lodging 571 - - 501 - 70
Fitness & Wellness 85,074 - 4,751 65,628 14,695 -
Total Experiential 492,152 17,907 5,752 453,728 14,695 70
Education:
Total Education - - - - - -
Total Investment Spending $ 492,152 $ 17,907 $ 5,752 $ 453,728 $ 14,695 $ 70
Six Months Ended June 30, 2025
Operating Segment Total Investment Spending New Development Re-development Asset Acquisition Mortgage Notes or Notes Receivable Investment in Joint Ventures
Experiential:
Eat & Play $ 45,910 $ 44,715 $ 921 $ - $ 274 $ -
Attractions 14,281 - - 14,281 - -
Ski 1,880 - - - 1,880 -
Experiential Lodging 1,246 - - - - 1,246
Fitness & Wellness 23,015 - 13,878 1,242 7,895 -
Total Experiential 86,332 44,715 14,799 15,523 10,049 1,246
Education:
Total Education - - - - - -
Total Investment Spending $ 86,332 $ 44,715 $ 14,799 $ 15,523 $ 10,049 $ 1,246
The above amounts include $0.6 million and $2.4 million in capitalized interest and $81 thousand and $175 thousand in other general and administrative direct project costs for the six months ended June 30, 2026 and 2025, respectively. Excluded from the table above is approximately $0.7 million and $3.1 million of maintenance capital expenditures for the six months ended June 30, 2026 and 2025, respectively.
During the six months ended June 30, 2026, we completed the acquisition of seven attraction properties from Six Flags Entertainment Corporation for a total of $304.4 million with approximately $11.0 million anticipated to be invested in additional improvements to the properties over the next two years. Enchanted Parks is operating the six U.S. properties under a long-term triple-net master lease, and La Ronde Operations, Inc. is operating the Canadian property under a long-term triple-net lease.
Mortgage Note Receivable Conversion
During the six months ended June 30, 2026, we exercised our purchase option to convert a $70.0 million mortgage note receivable secured by an experiential lodging property in Tennessee into a wholly-owned rental property subject to a long-term triple-net lease. In connection with this conversion, we recognized a gain on real estate transactions of approximately $1.0 million and a benefit for credit losses of approximately $1.3 million.
Mortgage Note Payoff
During the three and six months ended June 30, 2026, we received $10.8 million in net proceeds representing payment in full on a mortgage note receivable secured by an eat & play property in Oregon. In connection with this loan payoff, we recognized defeasance fee income of $0.5 million, which is included in "Mortgage and other financing income" in the accompanying consolidated statements of income and comprehensive income.
Chief Investment Officer Transition
On March 2, 2026, our Executive Vice President and Chief Investment Officer, Greg Zimmerman, retired from his position. The role of Executive Vice President and Chief Investment Officer has been assumed by Ben Fox, who joined us in August of 2025. During the six months ended June 30, 2026, we recorded retirement and severance expense related to Mr. Zimmerman's retirement totaling $1.4 million, which included cash payments totaling $0.4 million and accelerated vesting of nonvested shares totaling $1.0 million.
Debt and Capital Markets Activities
During the six months ended June 30, 2026, we entered into forward sales agreements pursuant to our "at-the-market" offering program ("ATM Program") to sell an aggregate of 1,189,884 common shares for initial gross proceeds of $70.9 million, or an average forward price of $59.58 per share, subject to adjustment upon settlement. We have the option to settle the outstanding common shares any time before the maturities of the respective forward sales agreements beginning on March 1, 2027 through June 30, 2027, subject to customary closing conditions, for the initial gross proceeds as adjusted for payment of commissions and applicable dividends as well as a daily adjustment based on the overnight bank borrowing rate less a spread. As of June 30, 2026, we have $329.1 million of remaining capacity under our ATM Program and expected net proceeds of unsettled forward sales agreements totaling $69.5 million.
On July 17, 2026, we entered into a new amended and restated $1.6 billion credit agreement that, among other things, extends the maturity date and reduces the interest rate payable on our $1.0 billion senior unsecured revolving credit facility and establishes a new $600.0 million senior unsecured delayed draw term loan facility due in 2032. See "Liquidity and Capital Resources" below for additional information.
Results of Operations
Three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025
Analysis of Revenue
The following table summarizes our total revenue (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Minimum rent (1) $ 152,561 $ 134,837 $ 17,724 $ 295,591 $ 268,678 $ 26,913
Percentage rent 4,825 4,594 231 6,941 7,851 (910)
Straight-line rent 5,006 5,137 (131) 8,496 8,534 (38)
Tenant reimbursements 6,140 5,260 880 12,219 10,681 1,538
Other rental revenue 501 523 (22) 971 966 5
Total rental revenue $ 169,033 $ 150,351 $ 18,682 $ 324,218 $ 296,710 $ 27,508
Other income (2) 11,764 12,218 (454) 21,834 23,854 (2,020)
Mortgage and other financing income 15,282 15,499 (217) 31,279 32,537 (1,258)
Total revenue $ 196,079 $ 178,068 $ 18,011 $ 377,331 $ 353,101 $ 24,230
(1) For the three months ended June 30, 2026 compared to the three months ended June 30, 2025, the increase in minimum rent resulted from an increase of $14.8 million related to property acquisitions and developments completed in 2026 and 2025. In addition, there was a net increase in minimum rent of $3.4 million related to existing properties. This was partially offset by a decrease in rental revenue of $0.5 million from property dispositions.
For the six months ended June 30, 2026 compared to the six months ended June 30, 2025, the increase in minimum rent resulted from an increase of $21.4 million related to property acquisitions and developments completed in 2026 and 2025. In addition, there was a net increase in minimum rent of $7.2 million related to existing properties. This was partially offset by a decrease in rental revenue of $1.7 million from property dispositions.
During the six months ended June 30, 2026, we renewed four lease agreements on a ski property and two attraction properties. We had no change in rental rates and paid no leasing commissions with respect to these lease renewals.
(2) The decrease in other income for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 related primarily to a decrease in operating income from two operating theatre properties that were sold during the six months ended June 30, 2025.
Analysis of Expenses and Other Line Items
The following table summarizes our expenses and other line items (dollars in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 Change 2026 2025 Change
Property operating expense $ 15,366 $ 14,661 $ 705 $ 30,719 $ 29,832 $ 887
Other expense (1) 11,064 11,959 (895) 22,053 24,570 (2,517)
General and administrative expense 13,976 13,230 746 28,218 27,254 964
Retirement and severance expense (2) - - - 1,423 - 1,423
Transaction costs 45 669 (624) 338 1,236 (898)
Provision (benefit) for credit losses, net (3) 138 997 (859) (5,459) 345 (5,804)
Depreciation and amortization (4) 48,630 42,080 6,550 93,587 83,169 10,418
Gain on real estate transactions (5) 182 16,779 (16,597) 1,209 26,163 (24,954)
Interest expense, net (6) 38,275 33,246 5,029 73,038 66,267 6,771
Equity in loss from joint ventures 984 1,681 (697) 3,616 4,328 (712)
Income tax expense 617 681 (64) 1,231 817 414
Preferred dividend requirements 6,040 6,040 - 12,072 12,072 -
(1) The decrease in other expense for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 related primarily to a decrease in operating expense from two operating theatre properties that were sold during the six months ended June 30, 2025.
(2) Retirement and severance expense for the six months ended June 30, 2026 related to the retirement of our former Executive Vice President and Chief Investment Officer. There was no retirement and severance expense for the six months ended June 30, 2025.
(3) The change in provision (benefit) for credit losses, net for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due to a credit loss benefit of $1.3 million recognized in connection with the conversion of a $70.0 million mortgage note receivable to a wholly-owned rental property during the six months ended June 30, 2026, and changes in our estimated current expected credit losses primarily due to improved property level performance and improved macro-economic conditions.
(4) The increase in depreciation and amortization for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 resulted from acquisitions and developments completed in 2026 and 2025. This was partially offset by property dispositions that occurred during 2025.
(5) The gain on real estate transactions for the six months ended June 30, 2026 related to the conversion of a $70.0 million mortgage note receivable into a wholly-owned rental property. The gain on real estate transactions for the six months ended June 30, 2025 related to the sale of two vacant theatre properties, two operating theatre properties, two leased theatre properties, one vacant early childhood education center and 10 early childhood education centers.
(6) The increase in interest expense, net for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 resulted from a decrease in capitalized interest and an increase in average borrowings. This was partially offset by an increase in interest income recognized on short-term investments.
Liquidity and Capital Resources
Cash and cash equivalents were $16.2 million at June 30, 2026. In addition, we had restricted cash of $4.4 million at June 30, 2026, which related primarily to escrow deposits required for property management, mortgage note and debt agreements or held for potential acquisitions, developments and redevelopments.
Mortgage Debt, Senior Notes and Unsecured Revolving Credit Agreement
At June 30, 2026, we had total debt outstanding of $3.3 billion, of which 99% was unsecured.
At June 30, 2026, we had outstanding $2.75 billion in aggregate principal amount of unsecured senior notes (excluding the private placement notes discussed below) ranging in interest rates from 3.60% to 4.95%. The notes contain various covenants, including: (i) a limitation on incurrence of any debt that would cause the ratio of our debt to adjusted total assets to exceed 60%; (ii) a limitation on incurrence of any secured debt that would cause the ratio of secured debt to adjusted total assets to exceed 40%; (iii) a limitation on incurrence of any debt that would cause our debt service coverage ratio to be less than 1.5 times; and (iv) the maintenance at all times of our total unencumbered assets such that they are not less than 150% of our outstanding unsecured debt. Interest payments on our unsecured senior notes are due semiannually.
At June 30, 2026, we had a $360.0 million outstanding balance under our $1.0 billion senior unsecured revolving credit facility with an interest rate of 4.67% at June 30, 2026.
On July 17, 2026, we entered into a Fifth Amended, Restated and Consolidated Credit Agreement (the "Amended Credit Agreement"), governing an amended and restated $1.0 billion senior unsecured revolving credit facility and a new $600.0 million senior unsecured delayed draw term loan facility. The Amended Credit Agreement replaced our existing $1.0 billion senior unsecured revolving credit facility.
The amendments to the revolving credit facility, among other things, (i) extend the maturity date from October 2, 2028 to July 17, 2030, with two six-month extension options, subject to the payment of additional fees and the satisfaction of customary conditions, (ii) generally reduce the interest rate payable on outstanding loans by 5 basis points, (iii) modify the asset value calculations under certain financial covenants to include the expected cash proceeds from the sale of common shares under qualified forward equity contracts and (iv) split the prior revolving facility's $300.0 million foreign currency sublimit into a separate, stand-alone foreign currency revolving credit facility of the same size.
The Amended Credit Agreement also established a new senior unsecured delayed draw term loan facility that, among other things, (i) provides for an initial committed amount of $600.0 million that may be drawn upon prior to January 17, 2027, subject to earlier termination, (ii) bears interest based on our credit ratings (SOFR plus 115 basis points at closing), (iii) carries a ticking fee of 0.25% per annum on undrawn commitments beginning on October 16, 2026, and (iv) matures on January 17, 2032.
In addition, the Amended Credit Agreement includes a $1.0 billion accordion feature on the combined unsecured revolving credit and delayed draw term loan facilities that increases the maximum amount available under the combined facilities from $1.6 billion to $2.6 billion, at our election and subject to lender consent and customary conditions.
At June 30, 2026, we had outstanding $179.6 million of Series B senior unsecured notes that were issued in a private placement transaction and are due on August 22, 2026. At June 30, 2026, the interest rate for these Series B private placement notes was 4.56%.
At June 30, 2026, our unsecured revolving credit facility and the private placement notes contain financial covenants or restrictions that limit our levels of consolidated debt, secured debt, investments outside certain categories, share repurchases and dividend distributions and require us to meet certain coverage levels for fixed charges and debt service. Additionally, these debt instruments contain cross-default provisions if we default under other indebtedness exceeding certain amounts. Those cross-default thresholds vary from $50.0 million to $75.0 million, depending upon
the debt instrument. We were in compliance with all financial and other covenants under our consolidated debt instruments at June 30, 2026.
In 2024, two experiential lodging properties located in St. Pete Beach, Florida, in which we hold unconsolidated equity investments, were severely damaged by two hurricanes. One of these properties was sold during the six months ended June 30, 2026 and all proceeds went into the receivership. We continue to work in good faith with our joint venture partners, the non-recourse debt provider and the insurance companies to identify a path forward in which we expect to result in the eventual removal of the unconsolidated equity investments in the remaining experiential lodging property and the related non-recourse debt from our portfolio. Accordingly, we determined that our investment in these joint ventures had no fair value and was not recoverable. There can be no assurance as to the ultimate outcome of our negotiations regarding our exit from these joint ventures.
Our principal investing activities are acquiring, developing and financing Experiential properties. These investing activities have generally been financed with proceeds from senior unsecured note and equity offerings. Our unsecured revolving credit facility and cash from operations are also used to finance the acquisition or development of properties, and to provide mortgage financing. We have and expect to continue to issue debt securities in public or private offerings. We have and may in the future assume mortgage debt in connection with property acquisitions or incur new mortgage debt on existing properties. We may also issue equity securities in connection with acquisitions. Continued growth of our real estate investments and mortgage financing portfolios will depend in part on our continued ability to access funds through additional borrowings and securities offerings and, to a lesser extent, our ability to assume debt in connection with property acquisitions. We may also fund investments with the proceeds from asset dispositions.
Capital Markets
As discussed above, during the six months ended June 30, 2026, we entered into forward sales agreements pursuant to our "at-the-market" offering program ("ATM Program") to sell an aggregate of 1,189,884 common shares for initial gross proceeds of $70.9 million, or an average forward price of $59.58 per share, subject to adjustment upon settlement. We have the option to settle the outstanding common shares any time before the maturity dates of the respective forward sales agreements beginning on March 1, 2027 through June 30, 2027, subject to customary closing conditions, for the initial gross proceeds as adjusted for payment of commissions and applicable dividends as well as a daily adjustment based on the overnight bank borrowing rate less a spread. As of June 30, 2026, we have $329.1 million of remaining capacity under our ATM Program and expected net proceeds of unsettled forward sales agreements totaling $69.5 million.
Liquidity Requirements
Short-term liquidity requirements consist primarily of normal recurring corporate operating expenses, debt service requirements and distributions to shareholders. We have historically met these requirements primarily through cash provided by operating activities. The table below summarizes our cash flows (dollars in thousands):
Six Months Ended June 30,
2026 2025
Net cash provided by operating activities $ 206,536 $ 186,690
Net cash (used) provided by investing activities (480,279) 29,823
Net cash provided (used) by financing activities 196,358 (223,906)
Commitments
As of June 30, 2026, we had 24 development projects with commitments to fund an aggregate of approximately $46.4 million, of which approximately $18.3 million is expected to be funded in the remainder of 2026. Development costs are advanced by us in periodic draws. If we determine that construction is not being completed in accordance with the terms of the development agreement, we may discontinue funding construction draws. We have agreed to lease the properties to the operators at pre-determined rates upon completion of construction.
We have certain commitments related to our mortgage notes investments that we may be required to fund in the future. We are generally obligated to fund these commitments at the request of the borrower or upon the occurrence
of events outside of our direct control. As of June 30, 2026, we had two mortgage notes with commitments totaling approximately $46.2 million, all of which is expected to be funded in the remainder of 2026. If commitments are funded in the future, interest will be charged at rates consistent with the existing investments.
Liquidity Analysis
We currently anticipate that our cash on hand, cash from operations, funds available under our $1.0 billion senior unsecured revolving credit facility, funds available under our $600.0 million senior unsecured delayed draw term loan facility, proceeds from issuances under our ATM Program and proceeds from asset dispositions will provide adequate liquidity to meet our financial commitments, including the amounts needed to fund our operations, make recurring debt service payments, allow distributions to our shareholders and avoid corporate level federal income or excise tax in accordance with REIT Internal Revenue Code requirements.
Long-term liquidity requirements consist primarily of debt maturities. We have $629.6 million of debt maturities due in 2026. We currently believe that we will be able to repay, extend, refinance or otherwise settle our debt maturities as the debt comes due and that we will be able to fund our remaining commitments, as necessary. However, there can be no assurance that additional financing or capital will be available, or that terms will be acceptable or advantageous to us.
Our primary use of cash after paying operating expenses, debt service, distributions to shareholders and funding existing commitments is in growing our investment portfolio through acquiring, developing and financing additional properties. We expect to finance these investments with cash on hand, excess cash flow, proceeds from asset dispositions or borrowings under our unsecured revolving credit facility as well as debt and equity financing alternatives. If we borrow the maximum amount available under our $1.0 billion senior unsecured revolving credit facility and $600.0 million senior unsecured delayed draw term loan facility, there can be no assurance that we will be able to obtain additional or substitute investment financing. We may also assume mortgage debt in connection with property acquisitions. The availability and terms of any such financing or sales will depend upon market and other conditions.
Capital Structure
We believe that our shareholders are best served by a conservative capital structure. Therefore, we seek to maintain a conservative debt level on our balance sheet as measured primarily by our net debt to adjusted EBITDAre ratio (see "Non-GAAP Financial Measures" for definitions). Because adjusted EBITDAre, as defined, does not include the annualization of investments put in service, acquired or disposed of during the quarter, or the potential earnings on property under development, the annualization of percentage rent and adjustments for other items, we also look at an additional ratio that reflects these adjustments. We also seek to maintain conservative interest, fixed charge, debt service coverage and net debt to gross asset ratios (see "Non-GAAP Financial Measures" for calculations).
Non-GAAP Financial Measures
Funds From Operations (FFO), Funds From Operations As Adjusted (FFOAA) and Adjusted Funds From Operations (AFFO)
The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO as a relative non-GAAP financial measure of performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. Pursuant to the definition of FFO by the Board of Governors of NAREIT, we calculate FFO as net income available to common shareholders, computed in accordance with GAAP, excluding gains and losses from real estate transactions and impairment losses on real estate, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships, joint ventures and other affiliates. Adjustments for unconsolidated partnerships, joint ventures and other affiliates are calculated to reflect FFO on the same basis. We have calculated FFO for all periods presented in accordance with this definition.
In addition to FFO, we present FFOAA and AFFO. FFOAA is presented by adding to FFO retirement and severance expense, transaction costs, provision (benefit) for credit losses, net, costs associated with loan refinancing or payoff, preferred share redemption costs and impairment of operating lease right-of-use assets and subtracting sale
participation income, gain on insurance recovery and deferred income tax (benefit) expense. AFFO is presented by adding to FFOAA non-real estate depreciation and amortization, deferred financing fees amortization and share-based compensation expense to management and Trustees, and subtracting amortization of above and below market leases, net and tenant allowances, maintenance capital expenditures (including second-generation tenant improvements and leasing commissions), straight-lined rental revenue (removing the impact of straight-line ground sublease expense), the non-cash portion of mortgage and other financing income and the allocated share of joint venture non-cash items.
FFO, FFOAA and AFFO are widely used measures of the operating performance of real estate companies and are provided here as supplemental measures to GAAP net income available to common shareholders and earnings per share, and management provides FFO, FFOAA and AFFO herein because it believes this information is useful to investors in this regard. FFO, FFOAA and AFFO are non-GAAP financial measures. FFO, FFOAA and AFFO do not represent cash flows from operations as defined by GAAP and are not indicative that cash flows are adequate to fund all cash needs and are not to be considered alternatives to net income or any other GAAP measure as a measurement of the results of our operations or our cash flows or liquidity as defined by GAAP. It should also be noted that not all REITs calculate FFO, FFOAA and AFFO the same way so comparisons with other REITs may not be meaningful.
The following table summarizes our FFO, FFOAA and AFFO including per share amounts for FFO and FFOAA, for the three and six months ended June 30, 2026 and 2025 and reconciles such measures to net income available to common shareholders, the most directly comparable GAAP measure (unaudited, in thousands, except per share information):
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
FFO:
Net income available to common shareholders of EPR Properties $ 61,126 $ 69,603 $ 117,704 $ 129,374
Gain on real estate transactions (182) (16,779) (1,209) (26,163)
Real estate depreciation and amortization 48,468 41,939 93,265 82,871
Allocated share of joint venture depreciation 996 985 1,992 2,021
FFO available to common shareholders of EPR Properties $ 110,408 $ 95,748 $ 211,752 $ 188,103
FFO available to common shareholders of EPR Properties $ 110,408 $ 95,748 $ 211,752 $ 188,103
Add: Preferred dividends for Series C preferred shares 1,938 1,938 3,876 3,876
Add: Preferred dividends for Series E preferred shares 1,938 1,938 3,876 3,876
Diluted FFO available to common shareholders of EPR Properties $ 114,284 $ 99,624 $ 219,504 $ 195,855
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
FFOAA:
FFO available to common shareholders of EPR Properties $ 110,408 $ 95,748 $ 211,752 $ 188,103
Retirement and severance expense - - 1,423 -
Transaction costs 45 669 338 1,236
Provision (benefit) for credit losses, net 138 997 (5,459) 345
Deferred income tax expense (benefit) 255 (93) 369 (623)
FFOAA available to common shareholders of EPR Properties $ 110,846 $ 97,321 $ 208,423 $ 189,061
FFOAA available to common shareholders of EPR Properties $ 110,846 $ 97,321 $ 208,423 $ 189,061
Add: Preferred dividends for Series C preferred shares 1,938 1,938 3,876 3,876
Add: Preferred dividends for Series E preferred shares 1,938 1,938 3,876 3,876
Diluted FFOAA available to common shareholders of EPR Properties $ 114,722 $ 101,197 $ 216,175 $ 196,813
AFFO:
FFOAA available to common shareholders of EPR Properties $ 110,846 $ 97,321 $ 208,423 $ 189,061
Non-real estate depreciation and amortization 162 141 322 298
Deferred financing fees amortization 2,699 2,102 5,371 4,308
Share-based compensation expense to management and trustees 4,296 3,912 8,395 7,779
Amortization of above and below market leases, net and tenant allowances (75) (81) (156) (162)
Maintenance capital expenditures (1) (509) (1,858) (720) (3,109)
Straight-lined rental revenue (5,006) (5,137) (8,496) (8,534)
Straight-lined ground sublease expense (282) - (331) 2
Non-cash portion of mortgage and other financing income (381) (566) (927) (863)
AFFO available to common shareholders of EPR Properties $ 111,750 $ 95,834 $ 211,881 $ 188,780
AFFO available to common shareholders of EPR Properties $ 111,750 $ 95,834 $ 211,881 $ 188,780
Add: Preferred dividends for Series C preferred shares 1,938 1,938 3,876 3,876
Add: Preferred dividends for Series E preferred shares 1,938 1,938 3,876 3,876
Diluted AFFO available to common shareholders of EPR Properties $ 115,626 $ 99,710 $ 219,633 $ 196,532
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
FFO per common share:
Basic $ 1.44 $ 1.26 $ 2.77 $ 2.48
Diluted 1.41 1.24 2.71 2.44
FFOAA per common share:
Basic $ 1.45 $ 1.28 $ 2.73 $ 2.49
Diluted 1.42 1.26 2.67 2.45
Shares used for computation (in thousands):
Basic 76,521 76,083 76,424 75,944
Diluted 77,017 76,571 76,897 76,404
Weighted average shares outstanding-diluted EPS 77,017 76,571 76,897 76,404
Effect of dilutive Series C preferred shares 2,380 2,344 2,375 2,340
Effect of dilutive Series E preferred shares 1,674 1,667 1,673 1,666
Adjusted weighted average shares outstanding-diluted Series C and Series E 81,071 80,582 80,945 80,410
Other financial information:
Dividends per common share $ 0.930 $ 0.885 $ 1.830 $ 1.750
(1) Includes maintenance capital expenditures and certain second-generation tenant improvements and leasing commissions.
The effect of the conversion of our convertible preferred shares is calculated using the if-converted method and the conversion, which results in the most dilution is included in the computation of per share amounts. The conversion of the 5.75% Series C cumulative convertible preferred shares and the 9.00% Series E cumulative convertible preferred shares would be dilutive to FFO, FFOAA and AFFO per share for the three and six months ended June 30, 2026 and 2025. Therefore, the additional common shares that would result from the conversion and the corresponding add-back of the preferred dividends declared on those shares are included in the calculation of diluted FFO and FFOAA per share and would be included in a calculation of AFFO per share.
Net Debt and Proforma Net Debt
Net Debt represents debt (reported in accordance with GAAP) adjusted to exclude deferred financing costs, net and reduced for cash and cash equivalents. By excluding deferred financing costs, net, and reducing debt for cash and cash equivalents on hand, the result provides an estimate of the contractual amount of borrowed capital to be repaid, net of cash available to repay it. Proforma Net Debt is presented by subtracting the estimated net proceeds from forward sales agreements under our ATM Program from Net Debt. We believe both of these calculations constitute beneficial supplemental non-GAAP financial disclosures to investors in understanding our financial condition. Our method of calculating Net Debt and Proforma Net Debt may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Gross Assets
Gross Assets represents total assets (reported in accordance with GAAP) adjusted to exclude accumulated depreciation and reduced by cash and cash equivalents. By excluding accumulated depreciation and reducing cash and cash equivalents, the result provides an estimate of the investment made by us. We believe that investors commonly use versions of this calculation in a similar manner. Our method of calculating Gross Assets may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Net Debt to Gross Assets Ratio and Proforma Net Debt to Gross Assets Ratio
Net Debt to Gross Assets Ratio and Proforma Net Debt to Gross Assets Ratio are supplemental measures derived from non-GAAP financial measures that we use to evaluate capital structure and the magnitude of debt to gross assets. We believe that investors commonly use versions of these ratios in similar manners. Our method of calculating the Net Debt to Gross Assets Ratio and Proforma Net Debt to Gross Assets Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
EBITDAre
NAREIT developed EBITDAre as a relative non-GAAP financial measure of REITs, independent of a company's capital structure, to provide a uniform basis to measure the enterprise value of a company. Pursuant to the definition of EBITDAre by the Board of Governors of NAREIT, we calculate EBITDAre as net income, computed in accordance with GAAP, excluding interest expense (net), income tax (benefit) expense, depreciation and amortization, gains and losses on real estate transactions, impairment losses on real estate, costs associated with loan refinancing or payoff and adjustments for unconsolidated partnerships, joint ventures and other affiliates.
Management provides EBITDAre herein because it believes this information is useful to investors as a supplemental performance measure because it can help facilitate comparisons of operating performance between periods and with other REITs. Our method of calculating EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.
Adjusted EBITDAre
Management uses Adjusted EBITDAre in its analysis of the performance of the business and operations of the Company. Management believes Adjusted EBITDAre is useful to investors because it excludes various items that management believes are not indicative of operating performance, and because it is an informative measure to use in computing various financial ratios to evaluate the Company. We define Adjusted EBITDAre as EBITDAre (defined above) for the quarter excluding sale participation income, gain on insurance recovery, retirement and severance expense, transaction costs, provision (benefit) for credit losses, net, impairment losses on operating lease right-of-use assets and prepayment fees.
Our method of calculating Adjusted EBITDAre may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Adjusted EBITDAre is not a measure of performance under GAAP, does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. This measure should not be considered as an alternative to net income or any other GAAP measure as a measurement of the results of our operations or cash flows or liquidity as defined by GAAP.
Net Debt to Adjusted EBITDAre Ratio and Proforma Net Debt to Adjusted EBITDAre Ratio
Net Debt to Adjusted EBITDAre Ratio and Proforma Net Debt to Adjusted EBITDAre Ratio are supplemental measures derived from non-GAAP financial measures that we use to evaluate our capital structure and the magnitude of our debt against our operating performance. We believe that investors commonly use versions of these ratios in similar manners. In addition, financial institutions use versions of these ratios in connection with debt agreements to set pricing and covenant limitations. Our method of calculating the Net Debt to Adjusted EBITDAre Ratio and Proforma Net Debt to Adjusted EBITDAre Ratio may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
Reconciliations of debt, total assets and net income (all reported in accordance with GAAP) to Net Debt, Proforma Net Debt, Gross Assets, Net Debt to Gross Assets Ratio, Proforma Net Debt to Gross Assets Ratio, EBITDAre, Adjusted EBITDAre, Net Debt to Adjusted EBITDAre Ratio and Proforma Net Debt to Adjusted EBITDAre Ratio (each of which is a non-GAAP financial measure), as applicable, are included in the following tables (unaudited, in thousands except ratios):
June 30,
2026 2025
Net Debt:
Debt $ 3,293,013 $ 2,792,970
Deferred financing costs, net 21,579 16,622
Cash and cash equivalents (16,197) (12,955)
Net Debt $ 3,298,395 $ 2,796,637
Proforma Net Debt:
Net Debt $ 3,298,395 $ 2,796,637
Estimated net proceeds from forward sales agreements (1) (69,536) -
Proforma Net Debt $ 3,228,859 $ 2,796,637
Gross Assets:
Total Assets $ 6,052,113 $ 5,560,880
Accumulated depreciation 1,801,757 1,641,916
Cash and cash equivalents (16,197) (12,955)
Gross Assets $ 7,837,673 $ 7,189,841
Debt to Total Assets Ratio 54 % 50 %
Net Debt to Gross Assets Ratio 42 % 39 %
Proforma Net Debt to Gross Assets Ratio 41 % 39 %
Three Months Ended June 30,
2026 2025
EBITDAre and Adjusted EBITDAre:
Net income $ 67,166 $ 75,643
Interest expense, net 38,275 33,246
Income tax expense 617 681
Depreciation and amortization 48,630 42,080
Gain on real estate transactions (182) (16,779)
Allocated share of joint venture depreciation 996 985
Allocated share of joint venture interest expense 502 430
EBITDAre $ 156,004 $ 136,286
Transaction costs 45 669
Provision (benefit) for credit losses, net 138 997
Adjusted EBITDAre (for the quarter) $ 156,187 $ 137,952
Adjusted EBITDAre (annualized) (2) $ 624,748 $ 551,808
Net Debt/Adjusted EBITDAre Ratio 5.3 5.1
Proforma Net Debt/Adjusted EBITDAre Ratio 5.2 5.1
(1) Represents proforma adjustments for estimated net proceeds from forward sales agreements that have not settled, as if they have been physically settled for cash as of the date presented. Settlement of these shares is subject to customary closing conditions, and actual net proceeds will be net of costs and certain adjustments calculated on the settlement date.
(2) Adjusted EBITDA for the quarter is multiplied by four to calculate an annual amount but does not include the annualization of investments put in service, acquired or disposed of during the quarter, as well as the potential earnings on property under development, the annualization of percent rent and participating interest and adjustments for other items.
Total Investments
Total investments is a non-GAAP financial measure defined as the sum of the carrying values of real estate investments (before accumulated depreciation), land held for development, property under development, mortgage notes receivable and related accrued interest receivable, net, investment in joint ventures, intangible assets, gross (before accumulated amortization and included in other assets) and notes receivable and related accrued interest receivable, net (included in other assets). Total investments is a useful measure for management and investors as it illustrates across which asset categories the Company's funds have been invested. Our method of calculating total investments may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. A reconciliation of total assets (computed in accordance with GAAP) to total investments is included in the following table (unaudited, in thousands):
June 30, 2026 December 31, 2025
Total assets $ 6,052,113 $ 5,699,762
Operating lease right-of-use assets (199,192) (170,755)
Cash and cash equivalents (16,197) (90,577)
Restricted cash (4,388) (8,071)
Accounts receivable (111,421) (97,855)
Add: accumulated depreciation on real estate investments 1,801,757 1,714,886
Add: accumulated amortization on intangible assets (1) 32,929 31,584
Prepaid expenses and other current assets (1) (42,561) (37,237)
Total investments $ 7,513,040 $ 7,041,737
Total Investments:
Real estate investments, net of accumulated depreciation $ 4,953,959 $ 4,494,259
Add back accumulated depreciation on real estate investments 1,801,757 1,714,886
Land held for development 20,168 20,168
Property under development 10,046 54,905
Mortgage notes and related accrued interest receivable, net 616,881 679,254
Investment in joint ventures 8,693 12,316
Intangible assets, gross (1) 99,022 63,239
Notes receivable and related accrued interest receivable, net (1) 2,514 2,710
Total investments $ 7,513,040 $ 7,041,737
(1) Included in "Other assets" in the accompanying consolidated balance sheet. Other assets include the following:
June 30, 2026 December 31, 2025
Intangible assets, gross $ 99,022 $ 63,239
Less: accumulated amortization on intangible assets (32,929) (31,584)
Notes receivable and related accrued interest receivable, net 2,514 2,710
Prepaid expenses and other current assets 42,561 37,237
Total other assets $ 111,168 $ 71,602
Impact of Recently Issued Accounting Standards
See Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on the impact of recently issued accounting standards on our business.
EPR Properties published this content on July 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 30, 2026 at 13:19 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]